promarstandardWinter2014

the

A Company

Focus on technical performance can reduceimpact of price fall

Put yourself in your staff’s shoes

Hutches bring many benefits

Regular feeder calibration pays

Planning next year’s forage should start now

Tight financial control can ease worries

Published by: Promar International, Alpha Building, London Road, Stapeley, Nantwich, Cheshire, CW5 7JW. Tel 01270 616800 • Fax 01270 616704 • www.promar-international.com

With income squeezed itwill really pay to keep aclose check on thefinances according to UKFBA Manager LouisaSercombe.Working with farms across thecountry, it is clear that the currenttrend in prices is having a big impact.The farmers who are best placed tomanage their way through have got atight control on the financial side ofthe business. Rather than waiting forthe year end to get a breakdown onperformance, they make sure theyhave detailed information to hand toguide decision making.

The Promar Farm Business Secretarieswork with a huge diversity of farmbusinesses to ensure that they havethe financial data they, their bank,their accountant and their consultantwill need to ensure the business is ingood shape.

Accurate and up to date financialinformation is always important butnever more so when there isdownward pressure of prices.Reduced cash inflow means things cansoon become tight but at the sametime the demands are increased todrive efficiency out of the farm and anincreased risk that the financialmanagement will fall behind.

Strong financial management canbring some huge benefits.

First and foremost is the need tomanage the overdraft and creditors sothat the true cash position of thebusiness is understood. This can also

include ensuring all monies due arecollected as quickly as possible,including any VAT refunds due.

Second there is a better understandingof how well the individual enterprisesare performing. Timely gross marginscan give an invaluable base for farmplanning. Is it worth expanding anenterprise? Would more cows pay?Can savings be made on heiferrearing? Was growing wholecrop agood move? Without detailedfinancial records it is hard to make abalanced judgement.

Perhaps most important is the peaceof mind in knowing that youcan concentrate on the practicalday to day farming, safe in theknowledge that the finances arebeing kept up to date and youhaven’t got to spend time in theoffice keeping on top ofeverything.

All our secretaries have a backgroundin farming either through education,living or working on farms or acombination of both. They understandthe importance and value of timelinessof information and the demandsoutside the office. They appreciatehow decisions outside the office can bestrongly backed up with informationproduced inside the office.

In addition to keeping the books up todate and providing accuratemanagement reports they can helpkeep a close eye on day to daymanagement. They can manage VATand operate payroll systems and helpwith livestock records and otherstatutory paperwork. They can helpensure your office is a source ofmanagement information to helpcontrol the business

Louisa Sercombe

ease worriesTight financial control can

The reality is that in the vast majorityof cases, doing nothing is not anoption. Changes have to be made bothshort and long term to develop moresustainable businesses. This will involveconsidering what is the best shape forthe business going forward. What is arealistic and appropriate herd size forthe farm? Will the current facilitiescope or is some investment needed?What are the realistic options forinvestment and development of theunit and how will these be affected byissues such as succession.

While long term plans are beingdeveloped it will be vital to reviewtechnical performance to identify anyopportunities to drive margins in boththe immediate short term and longerterm. Our experience is that in the vastmajority of cases it is possible toidentify scope to reduce costs and/orraise output.

Looking at the average and top 20%of farms on Milkminder there is a bigdifference. The challenge on everyfarm is to move performance into thetop 20%.

Consider your contractYou can’t affect base price but look tomaximise bonuses for hygiene, milkquality and for the production profile.Many contracts are paying more forbutterfat so it may make sense to tryto increase the butterfat percent butdo the sums first. Will modifying thediet to chase higher fat actually pay orwill it just increase costs for little or noreturn?

Monitor feed costsFeed costs are over 40% of productioncosts so a good place to start if youwant to try and cut overall costs.Prices are easing back and they shouldallow a 1.5ppl saving compared to lastyear. While this won’t offset the totalmilk price drop it will be a good start.Figure 2 shows the milk price: feedprice ratio for the last six years andpredicted for the next year. The ratio ispredicted to remain strong despitelower milk price so this is anopportunity, but don’t chase/buy milk.It will be vital to monitor margins andfeed cost per litre closely.

Is anything holding back yield?A whole host of factors can preventcows milking to potential and soreduce margins. The good news is thatmany of them can be quickly andcheaply rectified.

Cow comfort is crucial. Cows needclean comfortable beds and the longerthey spend lying down the better.Blood flow to the udder increases by30% when a cow lies down and it isestimated that 25% of milk yield isdirectly related to how comfortablecows are. Make sure you have enoughcubicles. The absolute minimum is onecubicle per cow but it has been shownthat having 5% more cubicles thancows can improve production.

Sufficient feed access is crucial as cowsneed to eat for about 5 hours a day,typically made up of 8-12 feeds.Anything that prevents this happeningwill reduce intakes and yields. Look toprovide a minimum of 46cm of troughspace per cow on a total adlib feedingsystem.

Take a look at cow flow. Researchsuggests that cows should spend nomore than three hours a day going toand from milkings. For cows milkedtwice a day this means 90 minutesmaximum away from the bedding andfeeding areas at each milking while forherds milked three times daily themaximum is one hour per milking.

It is estimated that for every hour perday above the three hour target yieldswill be depressed by a litre per cow perday. In addition there is a reduction inthe expression of heat behaviour and anincrease in the incidence of lameness.

Review mastitis protocolsHave you got protocols in place forpreventing mastitis and treating anycases that occur? Good protocols willensure consistent management and helpreduce the impact and costs. Fewermastitic cows also make for easier,faster milkings and better staff morale.

The key is to focus energies on whatyou can affect. Small incrementalchanges can soon add up. Settingtargets and improvement objectives foras many areas of management aspossible and following them throughwill help insulate against current lowprices and put the business in betterplace when prices rise again.

2 3

Lancashire base consultantAndrew Watson considerswhat steps can be taken tohelp offset the consequencesof the current low milkprices.No-one should be surprised by milkprice volatility. It has been a fact of lifenow for many years and it issomething we have been helpingclients insulate their businesses from.

Figure 1 shows the milk price over thelast seven years along with threedifferent lines representing commonlyreported levels of cost of production.At 26ppl farmers will have made apositive return 80% of the time. At 30ppl it is as very different picture.It is vital farmers know exactly wherethey stand and this is the starting pointfor plotting a route forward. What isthe breakeven point for your business?

The key lesson is that there is no singlesolution. Each farm is different with itsunique set of circumstances and it isvital to develop a plan whichacknowledges those circumstancesand the aspirations of those runningthe farm.

Andrew Watson

No one can deny that the lastsix months will have asignificant impact on thedairy industry. The cut in milk prices has affectedevery dairy farmer, and everyoneelse working in the dairy farmsector. Yet production continues torise and a recent Promar surveyconfirmed that the majority ofdairy farmers will still be lookingat options to expand.

UK production was 8% up to theend of August and the EU ispredicting 3.7% higher output in2014 compared to 2013. And thisis before the removal of quotasthat could signal further increases.

This extra production is beingproduced against a background ofa market facing reduced demandwhich will make increasing pricessomething of a challenge.However, the GDT auction pricesrose recently by 1.4% which mightsuggest that prices may at leasthave bottomed out.

Against this background farmersstill have to plan and run theirbusinesses. I think it is importantto remember that dairy farming isa long term business and hasalways had to ride out fluctuationsin fortunes – and in most casesdone so successfully. The annualproduction cycle is a year. It takesaround three years from aninsemination until a heifer entersthe herd. Forage planning todaywill affect production rightthrough to the end of next winter.

To weather a price decline such asis being experienced, it is vital totake a long term view of wherethe business needs to be and thesize, structure and level oftechnical performance required to

achieve the necessary level offinancial results. Then it isnecessary to identify theincremental changes that togethercan help to deliver improvementsin all aspects of performance

One bit of good news is that feedprices are generally declining, andwhile these will not offset theentire fall in milk prices they canhelp to soften the short term blow.

Dairy farming is not a businessthat can be managed based onshort term decision making. It needs long term targets thatreflect the nature of the business.At Promar, we work withcustomers reflecting theconsiderable breadth and diversityof dairy farms in the country tohelp develop and implement theplans that can deliver sustainabledairy businesses. We also work tohelp identify the opportunities toimprove technical performance.

In this issue of the Standard welook at factors affecting all dairybusinesses which are highlightedin our unique Radar analysis. If you want a free Radarassessement of your business, call us on 01270 616800.

James DunnManaging Director

James Dunn

Focus on technical performancecan reduce impact of price fall

Figure 2 - Milk price:feed price ratio

Figure 1 - Average GB Farmgate price

Riding outthe storm

Midlands based consultantDavid Rhodes believes thatfocussing on motivating staffcould be an essential step indeveloping a sustainablefarming system.How do you think your staff arefeeling at the moment with all thetalk of reduced margins anddownward pressure on profits? My experience from nearly 25 yearsas a herd manager is that they willprobably feel vulnerable andpossibly demotivated, yet they canbe a major asset in driving efficiencyfrom the business.

Their attitude and enthusiasm willhave a significant impact on howwell tasks are carried out and theyare best placed to spot problemsand suggest ways to improveperformance and reduce waste.With demotivated staff attention todetail and enthusiasm will soon wane.

As farm teams get larger and morespecialised, it is vital to invest moretime in managing staff effectively todrive overall performance.

Communication is keyDo your staff know what yourobjectives are and exactly what theirrole is? All too often staff do notunderstand what the business istrying to achieve and how theycontribute to this. So take the timeto make sure they can buy into whatyou are trying to achieve and cantake ownership of particular aspects.

Communication is a two wayprocess. Encourage staff to come

forward with ideas for howperformance can be improved.

Doing the job day in, day out theywill notice problems andopportunities to improve, so allowthem to contribute their ideas whichmight have a big impact on yields,margins or cost saving.

Make time to talk and listen to staff.This can be an informal discussionduring a coffee break but will betime well spent.

Set targetsTargets are a great motivatorbecause people like to try andachieve or exceed them and theywill respond to the challenge. Makesure the targets are meaningful tothe business and are achievable.Ensure they are commonly understoodand that performance against targetis regularly updated. A simplewipeboard is a cheap and effectiveway to do this. If targets are notbeing achieved talk about whatmight be done to rectify the situation.

Invest in trainingAs herds get bigger it becomesimportant to delegate more.The better trained your staffare, the more motivated theywill be and the more you candelegate. Find out if there arespecific skills they want tolearn and then arrangetraining. I have been told that ‘If I train someone it makesthem more attractive toother farms and theywill leave’!

My experience is the reverse. Peopleappreciate the investment intraining and they remain committedto the business that is investing inthem.

Some training will have a directimpact on costs and performance.For example, a foot trimming coursecan help reduce the costs associatedwith treating severe lameness whilemaking cows more mobile which isknown to improve intakes andproduction.

Let them focusAll too often I find that core peopleget taken away from their primaryrole to do other less skilled tasks.For example, the herdsman who getsput on a tractor, grain or straw carting.If someone is a herdsman employedto manage the cows let them focuson doing that job to the best oftheir ability, free from distractions.The benefits can be considerable.

Getting your team motivated andcommitted could have a big impacton how your herd performs so it iswell worth investing the time inmanaging them.

Modest investment in calfrearing facilities is helpingone Wiltshire farming familymove their business forward. Farming at Manor Farm, Aveburybrings some particular challengesfor Tony and Judy Farthing, who runthe tenanted farm with theirdaughter Katie and son-in-lawJonathan Guest. The farm is in aworld heritage site and includes theprehistoric Avebury stone circles.This makes developing the farmparticularly difficult.

The farm is home to the 160 headall year round Avebury herd ofpedigree Holsteins which averages8,300 litres on a system based ongrazing in the summer and a TMRdiet in the winter.

The focus has been on improvingperformance from the existing herdand the family are supported byherdsman Richard Peer and foremanPeter Steven. The herd is bred byGenus ABS RMS and the calving interval has been tightened by 30days in a year.

Working with Promar consultantJames Berry, the aim had been tolook to expand the closed herd to180 cows while allowing moreoptions for cow grouping, butputting up a new building was likelyto prove difficult.

“We wanted to be able to split themilking herd but the layout of thecubicles made this difficult,” explainsTony Farthing.

“Following discussions with James wedecided to look at changing calf rearingas this would release potential space formore cows.”

Calves were being reared in an oldcubicle building. Being right nextdoor to the cows with shared airspace meant this was not an ideallocation and respiratory problemswere an issue. It was also a labourintensive system. James Berry suggestedmoving the calves into hutches andrefurbishing the cubicle building.This would allow the herd expansion,simplify cow grouping and improvecalf management, while avoidingpotential planning issues.

Katie, who had taken on responsibilityfor calf rearing, investigated theoptions, looking for a flexiblesystem which was easy to manageand use, eventually settling on asystem from Holm and Laue.

“Being on an exposed site we needed toprovide adequate protection,” Katieexplains. “The system includes amoveable veranda which offers moreprotection from the elements and makes for a more pleasant working environment.

We went for a combination of 10 singlehutches and two multi-hutches that caneach hold 5-7 calves.

“The hutches are all really easy to cleanand have a gate so there is no need toclimb in and out which makesmanagement easier. They can be beddedfrom the back through a hatch whichalso improves ventilation. The multi-hutches have individual buckets whichmake it easy to check all calves aredrinking and they can be moved out ofthe way for easy cleaning.”

All calves are fed colostrum beforemoving into individual hutches.They are fed on cow’s milk, strawand calf rearer and have access tofresh water from day one. They willtypically move into the multi-hutches at around four weeks oldprovided they are eating solid foodand drinking water. They are movedfrom the hutches at weaning.

“We have already seen big benefits,”Katie continues. “Calves are strongerand healthier and we are seeing fewerrespiratory problems. Mortality hasdropped by two percentage points. Thefirst calves we moved out of the hutcheswere as big as the last batch from theold system that were two months older!As we are looking to calve at two yearsold, this better early growth is reallyimportant and will help us expand the herd.

“The hutch system cost around £12,000and will be used to rear around 130calves in 6.5 batches per year. They areguaranteed for 10 years so this willwork out at around £10 per calf.

“With the new calf system working wellwe can now focus on sorting thecubicles, increasing cow numbers andfurther improving milk output.”

5

Hutches bring

4

Jonathan and Katie Guest and Tony Farthing

James Berry

David Rhodes

Put yourself in yourstaff’s shoes many benefits

Analysis of Promar Milkminder datashows that producing more fromforage can have a significant impacton margins. The table compares theaverage results with those of the top20% selected by milk from forage. The top 20%:• Produced 800 more litres per cow

from forage• Achieved 40% of total production

from forage compared to 27%• Had a 13% lower feed rate per litre• Had a feed cost/litre 13% less than

average from a similar cost/tonne• Achieved a higher margin per litre

and similar margin per cow despiteproducing 470 litres less per cow

Perhaps most significantly, by producingmore from forage the top 20% arebetter insulated from fluctuations inboth milk and feed prices.

To produce 40% of milk from forage,the average Milkminder farmer wouldhave to produce two litres more fromforage per cow per day, which equatesto less than 1kgDM extra forage percow per day. For the average 182 cowherd that adds up to around 66tonnes of additional forage dry matterover the year. But it could generate anadditional £18,000 in margin.

Farmers who successfully producemore from forage will have plans forgrazing and conserved forage withtargets, and they will review andmodify the plan as the season unfolds.For example, in the last year this mighthave involved taking paddocks out ofthe rotation when grass growth wasvigorous to maintain grazing quality and increase silage production.

Start planning nowIt is important to start developing aforage plan as soon as possible,beginning with a review of currentperformance. What is your current milkfrom forage and how much forage wasproduced? What production from foragewill your current silage stocks support.

Then consider targets for next year forboth milk from forage and forageproduction? What grazing areas will berequired and how much silage do youneed to make to achieve the targetproduction? These will allow you todevelop a management plan toproduce the target production while youstill have time to influence production.• Now is the ideal time to take soil

samples to ensure that nutrient levelsare as required to maximise potentialgrowth. Fertiliser purchases can bemade to address any deficiencies

• Grazing infrastructure should bereviewed. Are paddocks theappropriate size? Is access suitablefor extended grazing? Invest in arising plate meter so you canmeasure covers and improve grazingsupply over next summer

• Cropping policy can be assessed toensure total silage output will hittarget. What acreage of first andsecond cut are required? Whatcontingencies can be made in theevent of a late season to ensure totaloutput is achieved? How muchmaize is required and which varietywill give the best combination of drymatter production and energycontent? Is wholecrop an option?

• Talk to your contractor sooner ratherthan later so he understands yourobjectives and the acreages that willbe cut. The relationship with yourcontractor can have a huge impacton your forage production

Taking the time to make a detailedforage plan will help underpinproduction and margins next year andensure milk from forage is maximised.

Planning next year’sforage should start now

6 7

When is the last time you checkedthat your parlour or out of parlourfeeders were feeding what youexpected or what the computer isprogrammed to feed? As with anymechanical device, accuracy canchange with time. Furthermore, thedensity of different feeds can vary,affecting feeder accuracy.

If feeders are dispensing too little, cowswill be underfed, milk poorly andpotentially suffer from lower fertility.If they feed too much, your costs willincrease with no guarantee of aneconomic yield response and an increasedrisk of problems such as acidosis.

All too often it is taken for grantedthat the feeders are accurate and leftunchecked, but in the current economicclimate it will pay to make sure yourcows are getting the feed expected.

A client of mine in Cheshire installednew parlour feeders earlier this year.When we carried out a regular spotcheck a couple of months later wefound that more feed was being usedthan expected, around eight tonnesper month.

When we investigated further wefound that on average the feederswere dropping 30% more thanexpected – a huge difference madeworse by a change in the parlourconcentrate since the feeders wereoriginally installed. In one month, thecost of feeding inaccuracy was over£1800 which would have had a hugeimpact on margins if left uncorrected.

Check accuracy regularlyIt will really pay to keep a close eye onthe accuracy of feed allocation.Correct allocation will reduce costsand improve cow health andperformance.

The accuracy of dispensing of parlourand out of parlour feeders shouldideally be checked every month as it isnot unusual to see inaccuracies of asmuch as 10% developing in just a fewweeks. Feeder accuracy should alsobe checked every time the formulationof the compound is changed as thiswill affect the density of the product.It will only take around an hour tocheck, adjust and recalibrate feedersbut the benefits can be considerable.

And don’t forget to checkthe weigh cells on the diet feeder asinaccuracies here can have a similarimpact. With tonnes of silage beingdropped into feeders followed bylarge quantities of other feeders, it isnot unusual for the weigh cells tobecome inaccurate over time whichcan become significant, especiallywhere smaller quantities of moreexpensive ingredients are concerned.Again, making the time to check theweigh cells monthly will be a soundinvestment.

Finally, always check feed usageagainst the invoices. Are you buyingwhat is expected? Do loads last aslong as expected or are you gettingthrough feed too quickly? Checkinginvoices can help highlight possibleproblems with feeding accuracy.

Keeping tabs on feeder accuracy willbe one way to help maintain yieldsand margins this winter.

Ensuring accurate allocation of feed is vital to keep close control on themajor cost of milk production, but as Andy Taylor, consultant in Cheshire,explains many parlour feeders may not be feeding what is expected.

Milk from forage continues to underpin higher margins per cow,and as Yorkshire consultant Alistair Hugill explains, it pays to startplanning next year’s forage production sooner rather than later.

Andy Taylor

Alistair Hugill

Regular feedercalibration pays

Promar Milkminder Promar Milkminder Differencetop 20% by milk average

from forageCows in herd 193 182Yield per cow (L) 7608 8074 -466Milk from forage per cow (L) 3005 2209 +796% of total production 40% 27% +13%from forage (%)Concentrate use (kg/L) 0.29 0.33 -13%Purchased feed cost/litre (P) 7.28 8.58 -13%Margin per litre (p) 25.96 24.75 +5%Margin per cow (£) 1975 1998 -1%